Microeconomics Answers

1.    Which list contains only things that would make people want to hold more money?

a.     Interest rates decrease, the price level increases.

b.    Interest rates decrease, the price level decreases.

c.     Interest rates increase, the price level increases.

d.    Interest rates increase, the price level decreases.

1.    When the central bank decreases the money supply, we expect interest rates

a.     and stock prices to rise.

b.    and stock prices to fall.

c.     to rise and stock prices to fall.

d.    to fall and stock prices to rise.

1.    If wages adjust fully to price increases in the long run, fiscal policy will

a.     have no affect on the price level.

b.    have no affect on output.

c.     have no affect on either output or the price level.

d.    affect both output and the price level.

1.    When the economy is producing at full capacity, the aggregate supply curve becomes

a.     horizontal.

b.    downward sloping.

c.     vertical.

d.    upward sloping.

1.    The level of aggregate output demanded rises when the price level falls, because the resulting decrease in the interest rate will lead to

a.     higher investment spending and higher consumption spending.

b.    lower investment spending and higher consumption spending.

c.     higher investment spending and lower consumption spending.

d.    lower investment spending and lower consumption spending.

1.    Other things equal, a decrease in the price level ________ the equilibrium interest rate and ________ equilibrium output.

a.     increases; increases

b.    increases; decreases

c.     decreases; increases

d.    decreases; decreases

1.    The quantity of output supplied at different price levels is represented by the

a.     production function.

b.    aggregate demand curve.

c.     aggregate supply curve.

d.    aggregate expenditures curve.

1.    Business cycles

a.     are explained mostly by fluctuations in corporate profits.

b.    no longer are very important due to government policy.

c.     are fluctuations in real GDP and related variables over time.

d.    All of the above are correct.

1.    Floating exchange rates are determined by

a.     each nation's government.

b.    gold values.

c.     total expenditures of each country.

d.    the unregulated forces of supply and demand.

1.    If a nation's interest rates are relatively low compared to those of other countries, then the exchange value of its currency will tend to

a.     appreciate under a system of fixed exchange rates.

b.    remain constant.

c.     depreciate under a system of floating exchange rates.

d.    appreciate under a system of floating exchange rates.